Importing for the first time is complex, yet the rewards for getting started can be lucrative — from access to cheaper products to a stronger competitive stance in the marketplace. But the biggest mistake importers make is this: How are you going to sell the product you import at a profit? Here I provide three solutions to that nagging question. First, though, let me set the stage for product imports.
Typical scenario for product imports
You find a terrific supplier located in a part of the world where goods flow in and out easily. You draw up a contract that is mutually beneficial. You know the perfect time of year to import in order not to run up against any port congestion. You hire a good transport expert, monitor all shipping costs, and even home in on unanticipated costs such as peak season surcharges, terminal handling charges and bunker adjustment factors.
You consult with your bank relationship manager to figure out the absolute best way to stretch out the payment to the supplier so you don’t get in over your head financially.
Hurrah! You’ve done everything correctly on handling the product imports except for one major thing: When the product arrives at your warehouse (ahem, you did make sure you have a warehouse lined up, right?), how will you sell it?
The last thing you need is a warehouse full of products that can’t be sold. To avoid that dilemma, here’s what I suggest.
1. Line up customers in advance
Let’s say you are importing brooms that will be sold to Target. What you don’t want to do is wait until you have 5,000 brooms in your warehouse before you start making calls to buyers at other DIYs or home improvement stores.
Call on buyers well in advance of placing an order with a supplier and get their expressed interest, preferably in writing.
Think of it as a buyer’s commitment (BC). If you collect enough of these BCs, you will feel far more confident when you place the order with your supplier.
Caution: Just because you get a buyer’s commitment it doesn’t necessarily mean the customer will buy once you have imported the product. It’s a chance you take.
2. Pre-sell goods
Pre-selling goods is different from getting a BC in writing. Pre-selling is an actual purchase order outlining the details of the sale with an obligation from the buyer to pay.
If you can pre-sell orders that are large in size, say 1,000 brooms for each store, you might consider making an arrangement with the customer to have the goods shipped direct to his door, called directed store-door delivery (SDD).
The only drawback is the customer learns who the supplier is and you don’t have a chance to spot-check quality. The advantage is no inventory carrying costs and you save money on transportation because you are bypassing your warehouse for direct delivery to your customer. Oh, and on that spot-check quality issue, you can avoid that to a certain degree by getting a pre-shipment inspection on your product imports.
3. Feature the products on your eCommerce site
Some eCommerce platforms have the option that allows your customers to pre-order. Inquire. I don’t always recommend this. But as long as you tell the customers the truth, that the product won’t be available for 30 to 45 days, for example, you can feature the expected product imports and hope that you receive lots of orders during a relatively short period of time. That way, orders queue up and you can see how much you can afford to order from your supplier based on the pre-orders from customers.
To achieve a certain price point, most suppliers have a minimum order amount, so that is the goal you want to achieve.
Note: When selling items as a preorder, from a legal standpoint, you are not supposed to capture the payment immediately. You can authorize it, but you are only supposed to capture it just before or soon after shipping. Once you hit your minimum, place the order with your supplier and as soon you receive the goods start shipping products to customers. Remember, it will take at least 20 to 30 days to import the product.
Editor’s note: GoDaddy’s Online Store makes it easy to set up an eCommerce site, including three baked-in shipping options.
It’s really all about trust
Whether you line up customers in advance or pre-sell merchandise, trust is a critical factor in the grand scheme of the product imports process. If a supplier or customer doesn’t trust you, nothing gets done, or if it gets done at all, it will be a mighty slow process. Factor that in as you move forward.
Have you ever been in a position where you imported goods and couldn’t sell them once they arrived? If so, what did you do? Send me an email (ldelaney@globetrade.com) and I’ll feature your story.
